Disappointing Data Questions Fed Decision to Hike as USD Tumbles
The loonie is rising today thanks in no small part to two factors. The softer ISM Non-manufacturing data has slowed down and missed expectations at 53.5. The price of oil continues to rise as Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC are teasing some sort of agreement to curb production. Higher energy prices and a weaker U.S. economy has given the loonie a foothold as it broke through the 1.38 price level.
The USD/CAD has depreciated 1.60 percent in the past 24 hours. The currency pair hit a session high of 1.4103 and is trading at 1.3804 after trading below 1.38 for a brief moment. The strength of the loonie has more to do with the weakness of the USD ahead of Friday’s employment figures. The softer economic indicators have put a big question mark around the U.S. Federal Reserve’s forecast of 4 rate hikes this year. Give the macro economic environment even 2 would be a stretch and there are some analysts that are even calling for negative rates.
A strong private payrolls report at 205,000 new jobs was not enough to offset the ISM non-manufacturing PMI that came in below expectations at 53.5. The NFP on Friday will give investors a better idea on what the health of the U.S. economy and what steps the Fed might take to boost growth. The fact that this is an election year already limits the amount of market intervention from the Fed without showing any political bias.
West Texas and Brent crude both saw massive surges despite growing inventories in the U.S. The chatter that has built up around a potential agreement between OPEC and non-OPEC nations remains a pipe dream, but one the market is currently entertaining. The Russian central bank continues to price oil between $20 to $40 and the Russian government is coy on given any clear hints they would enter an agreement. Saudi Arabia and Iran remain question marks as they battle for marketshare within OPEC will be the highlight of 2016, so it is unclear if they can put their objectives aside for the good of the organization.
The CAD will trade tomorrow with little cover from economic data. Canadian employment data will be release at the same time as the American counterpart. The market will be obsessing on the NFP numbers given the potential implications, but Canadian numbers will play a big part on how the loonie ends the week. After a strong December Canadian jobs are expected to slow down, but keeping the unemployment rate steady at 7.1 percent.
CAD events to watch this week:
Thursday, February 4
8:30am USD Unemployment Claims
Friday, February 5
8:30am CAD Employment Change
8:30am CAD Trade Balance
8:30am CAD Unemployment RateUSD
8:30am USD Non-Farm Employment Change
8:30am USD Trade Balance
8:30am USD Unemployment Rate
*All times EST
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.
Opinions are the authors — not necessarily OANDA’s, its officers or directors. OANDA’s Terms of Use and Privacy Policy apply. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Recommended Content
Editors’ Picks
EUR/USD holds above 1.0700 ahead of key US data
EUR/USD trades in a tight range above 1.0700 in the early European session on Friday. The US Dollar struggles to gather strength ahead of key PCE Price Index data, the Fed's preferred gauge of inflation, and helps the pair hold its ground.
USD/JPY stays above 156.00 after BoJ Governor Ueda's comments
USD/JPY holds above 156.00 after surging above this level with the initial reaction to the Bank of Japan's decision to leave the policy settings unchanged. BoJ Governor said weak Yen was not impacting prices but added that they will watch FX developments closely.
Gold price oscillates in a range as the focus remains glued to the US PCE Price Index
Gold price struggles to attract any meaningful buyers amid the emergence of fresh USD buying. Bets that the Fed will keep rates higher for longer amid sticky inflation help revive the USD demand.
Sei Price Prediction: SEI is in the zone of interest after a 10% leap
Sei price has been in recovery mode for almost ten days now, following a fall of almost 65% beginning in mid-March. While the SEI bulls continue to show strength, the uptrend could prove premature as massive bearish sentiment hovers above the altcoin’s price.
US core PCE inflation set to signal firm price pressures as markets delay Federal Reserve rate cut bets
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.3% on a monthly basis in March, matching February’s increase.